THE INSIDER TRADING SANCTIONS ACT: INCORPORATING A MARKET INFORMATION DEFINITION

Capital formation, economic growth and stability depend on investor confidence in the fairness and integrity of the capital markets. The U.S. securities markets generally are liquid, efficient, and fair. The prices of the vast majority of actively traded securities reflect available public information concerning companies and the economy [1]. In recent years, however, insider trading has been viewed as a significant threat to the fairness and integrity of the U.S. securities markets. Insider trading refers to the practice of trading in the securities markets by those in possession of material nonpublic information. Corporate officers and other corporate insiders, as well as persons who obtain nonpublic information (" tippees"), can reap large profits by purchasing or selling securities prior to the announcements of important corporate events. Neither the Securities Act of 1933 [2] nor the Securities Exchange Act of 1934 [3] (the "Exchange Act") provides a direct prohibition against insider trading. The courts and the Securities and Exchange Commission ("SEC") have attacked insider trading through section 10(b) [4] of the Exchange Act, a general antifraud provision, and through rule 10b-5 [5], adopted by the SEC under its rulemaking authority. The prevention of insider trading has become one of the SEC's major enforcement goals [6]. In 1983, the SEC filed twenty-four insider trading cases, twice as many as two years earlier [7]. The SEC also has attempted to prevent those trading on material nonpublic information from retaining anonymity by trading through a foreign financial institution. In many countries those institutions are legally obligated not to divulge the trader's name because of relevant bank secrecy or blocking legislation [8]. In contrast to the efforts of the SEC, the U.S. Supreme Court has limited